Arthur Levitt and AIG – Gone Over To The Dark Side, Artie?

After all, greater minds than mine, like the famous Arthur Levitt, have made sure that, “AIG’s selection process was designed and executed with integrity, and the Audit Committee’s evaluation of the proposals was both fair and impartial. AIG did an exceptional job.”

It seems Levitt was hired by AIG in 2005 to spruce up their image in the wake of Elliott Spitzer’s investigation of AIG. Mr. Levitt’s tenure at that time was expected to be less than a year as a special consultant to the Board, but it has obviously taken longer than that to address AIG’s governance problems and will continue to take longer to fix them completely, if that’s possible. Mr. Spitzer was the former Attorney General for the State of New York and is now their Governor.

The audit committee of AIG’s board of directors spent 12 months on the RFP process, which is part of the company’s 2006 settlement with the New York Attorney General’s Office, said AIG spokesman Chris Winans.

The agreement, Winans said, required AIG to take actions above and beyond the normal annual review of its relationship with the company’s independent auditor. This RFP is something we did as part of the settlement agreement, he said. It requires us to do the RFP process for the 2008 fiscal year.

In 2006, AIG agreed to pay a total of $1.64 billion to settle litigation stemming from New York state and federal investigations of its accounting, financial reporting and insurance brokerage practices, and claims related to workers’ compensation premium taxes.

Mr. Levitt, therefore, is not a court appointed monitor based on a settlement with the SEC, a la Mr. Breeden and KPMG, but a shill for AIG.

I have seen some Google searches regarding this “RFP” process wherein other firms, in particular Deloitte, are searching for more details about why they weren’t chosen. Let me give them all a clue… The fix was in.

I have requested via the Freedom of Information Act provisions for the State of New York Attorney Generals office, a copy of the RFP, the responses, the evaluation process and the grading of all proposal submissions. I have heard no response from them. Given that this was a public agency mandated process, I would assume that public disclosure would be mandated. Will make for interesting reading, if so. How can anyone for the Attorney General’s Office be sure that it was a fair and competitive process if they also do not see and approve the process that AIG conducted?

As for Mr. Levitt, I am disappointed. I guess everyone has to make a buck. But I had hoped he would do it by being on the side of the investor and the other stakeholders of AIG, and not on the side of perpetuating the myth of a job well done by PwC as AIG’s auditor.

Update: One of my favorite writers on these subjects reminded me:
“If you really want to have some fun with this, remember also that Levitt can’t let go of his affiliations inside the Beltway — now acting as co-chair of the so-called Paulson committee, along with Don Nicholaisen. Looking at the list of members, it’s almost sure to be MOTS…”

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Thanks for the super article. It sure helps “connect the dots” to the flock of insurance vampires and their accountant cohorts. I have used your article to update the following pages in the NEW “The Catbird Seat” website – the OLD version having been shut down by the U.S. Department of Justice. For more of the story behind AIG and PricewaterhouseCoopers, please visit:

[…] has been AIG’s auditor for a while. In fact, they were just reappointed with the blessing of Arthur Levitt, in spite of having advised and approved previous valuations and presided during the period when […]

[…] in spite of their longstanding relationship with the firm that was now in so much trouble, PwC was reappointed as AIG’s auditor, with the endorsement of Arthur Levitt. Levitt had been hired by AIG to restore good corporate […]

[…] in spite of their longstanding relationship with the firm that was now in so much trouble, PwC was reappointed as AIG’s auditor, with the endorsement of Arthur Levitt. Levitt had been hired by AIG to restore good corporate […]

[…] in spite of their longstanding relationship with the firm that was now in so much trouble, PwC was reappointed as AIG’s auditor, with the endorsement of Arthur Levitt. Levitt had been hired by AIG to restore good corporate […]

[…] in spite of their longstanding relationship with the firm that was now in so much trouble, PwC was reappointed as AIG’s auditor, with the endorsement of Arthur Levitt. Levitt had been hired by AIG to restore good corporate […]

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Francine McKenna (@retheauditors) has more than twenty-five years of experience in consulting and professional services including tenure at two Big 4 firms, both in the US and abroad. Look for my column, "Accounting Watchdog" at Forbes.com and "Accountable" at American Banker. For more information, click "About" at the bottom of this page. For more information contact Francine McKenna, fmckenna@mckennapartners.com